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Problem 11-2A Cash dividends, treasury stock, and statement of retained earnings C3 P2 P3 Kohler Corporation reports the following components of stockholders’ equity on December 31, 2013 Common stock $10 par value, 100,000 shares authorized, 40,000 shares issued and outstanding Paid-in capital in excess of par value, common stock $400,000 60,000 . . . . . . . . . . . . . . . .. .. . . .. . Sage 50 Total stockholders’ equity In year 2014, the following transactions affected its stockholders equity accounts 1 Purchased 4,000 shares of its own stock at $20 cash per share Directors declared a $2 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record. Paid the dividend declared on January 5 Sold 1,500 of its treasury shares at $24 cash per share. Sold 2,500 of its treasury shares at $17 cash per share. Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record. Jan. Jan. 5 Feb. 28 July 6 Aug. 22 Sept. 5 Oct. 28 Paid the dividend declared on September 5 Dec. 31 Closed the $388,000 credit balance (from net income) in the Income Summary account to Retained Earnings Required 1. Prepare journal entries to record each of these transactions for 2014 2. Prepare a statement of retained earnings for the year ended December 31, 2014 3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2014 Check (2) Retained earnings, Dec. 31, 2014, $504,500
Expert Answer
1. Required journal entries are as prepared below:
| Date | Particulars | L.F | Amount ($) | Amount ($) |
| 2014 | ||||
| Jan-01 | Treasury Stock | 80,000 | ||
| Cash (4,000*20) | 80,000 | |||
| (For purchased own shares) | ||||
| Jan-05 | Retained earnings (36,000*2) | 72,000 | ||
| Common Stock dividend Payable | 72,000 | |||
| (For dividend declared) | ||||
| Feb-28 | Common Stock dividend Payable | 72,000 | ||
| Cash | 72,000 | |||
| (For dividend paid) | ||||
| Jul-06 | Cash (1,500*24) | 36,000 | ||
| Treasury Stock (1,500*20) | 30,000 | |||
| Paid in Capital, Treasury Stock (1,500*4) | 6,000 | |||
| (For treasury stock re-issued) | ||||
| Aug-22 | Cash (2,500*17) | 42,500 | ||
| Paid in capital, Treasury stock | 6,000 | |||
| Retained Earnings | 1,500 | |||
| Treasury Stock (2,500*20) | 50,000 | |||
| (For treasury stock re-issued) | ||||
| Sep-05 | Retained earnings (40,000*2) | 80,000 | ||
| Common Stock dividend Payable | 80,000 | |||
| (For dividend declared) | ||||
| Oct-28 | Common Stock dividend Payable | 80,000 | ||
| Cash | 80,000 | |||
| (For dividend paid) | ||||
| Dec-31 | Income summary | 388,000 | ||
| Retained earnings | 388,000 | |||
| (For closed Income statement account) |
| Kohler Corporation | |
| Statement of Retained earnings | |
| For the year ended December 31, 2014 | |
| Retained Earning, January 1 | 270,000 |
| Add: Net profit | 388,000 |
| Less: | |
| Dividend on shares | 152,000 |
| Treasury Stock reissued | 1,500 |
| Retained Earning, December 31 | 504,500 |
| Kohler Corporation | |
| Stockholders Equity | |
| For the year ended December 31, 2014 | |
| Common Stock $10 par 40,000 shares authorized | |
| 40,000 issued | 400,000 |
| Paid in Capital in excess of Par-Common stock | 60,000 |
| Retained earnings | 504,500 |
| Total stockholders equity | 964,500 |
